Supreme Court of India
NADIAD ELECTRIC CO. LTD.versusNADIAD BOROUGH MUNICIPALITY & ANR.
- Citation
- 1979 INSC 264
- Decided
- 12 December 1979
- Disposal
- Appeal(s) allowed
- Bench
- P N SHINGAL
Holding
An establishment is entitled to the benefit of Section 22‑A(3) only if it has been notified under Section 22‑A(1); absent such notification, the municipality could not compel the licencee to continue supply on the original terms.
Summary
The Nadiad Borough Municipality entered a 20‑year electricity supply agreement with Nadiad Electric Co. Ltd. in 1940. When the agreement expired in August 1960, the company refused to continue supply at the original rates, offering only revised rates. The municipality sued for a declaration that, under Section 22‑A(3) of the Indian Electricity Act, 1910, the company must continue supply on the same terms until the municipality gives notice to discontinue. The key issue was whether the municipality qualified as an "establishment" referred to in Section 22‑A(1) and whether a State Government notification in the Official Gazette was a prerequisite for invoking Section 22‑A(3). The Supreme Court held that the benefit of Section 22‑A(3) applies only to establishments that have been notified under Section 22‑A(1); since no such notification was issued for the municipality, it could not claim the statutory benefit. Consequently, the company was not bound to continue supply on the original terms, and the trial court’s dismissal of the suit was restored.
Issues considered
- The municipality's status as an "establishment" under Section 22‑A(1) of the Indian Electricity Act, 1910.
- Whether a State Government notification in the Official Gazette is required for an establishment to claim the benefit of Section 22‑A(3).
- The effect of Section 22‑A(3) on a licencee’s contractual obligations after expiry of an agreement.
Legislation cited
- Electricity (Amendment) Act, 1959
- Electricity (Supply) Act, 1948s. 57, s. 57A
- Indian Electricity Act, 1910s. 21, s. 22, s. 22-A(1), s. 22-A(3), s. 23, s. 24
Subjects
Indian Electricity ActSection 22-Amunicipal electricity supplycontract continuationofficial gazette notificationpublic interestlicencee obligations
Judgment
476
A NADIAD ELECTRIC CO. LTD.
v.
NADIAD BOROUGH MUNICIPALITY & ANR.
December 12, 1979
[P. N. SHINGHAL AND E. S. VENKATARAMIAH, JJ.J
Jnc/ian Electricity Act, 1910 (9 of 1910)-S. 22-A(3)-Scope of-Munici-
pality entering into an agreement with company for supply of electrical energy-
Obligation to continue sitpply after expiry of agreement-When arises-State
Governn1ent to notify the establishment entitled to claim benefit-Whether
necessary.
c
Section 22-A of the Indian Electricity Act, 1910 was inserted in the Act by
tho Electricity (Amendment) Act, 1959 (32 of 1959). Sub-section 1 of section
.22-A authorised the State Government to issue direction to a licensee to supply
energy to an establishment in preference to any other consumer, if in its opinion
it is necessary in the public interest to give such direction and (ii) if the estB-
D blisbment in question is in the opinion of the State Government aD establish-
ment used or intended to be used for maintaining supplies and services essential
to the con1n1unity and the decision of the State Government that in its opinion
the establishment is used or intended to be used for maintaining supplies and
services essential to the community is notified by that Government in the Official
Gazette. Sub-section (3) of Section 22-A provides that where in any agree·
ment by a licensee, whether made before or after the commencement of the
E Electricity (Amendment) Act, 1959 for the supply of energy with any establish-
ment 1eferred to in sub-section (1) expires, the licensee shall continue to supply
energy to such establishment on the same terms and conditions as are specified
in the agreement until receipt of a notice in writing from the establishment
requiring discontinuance of the supply.
The Respondent-Municipality which was under an obligation to make rea-
F flOnable and adequate provision for lighting of public streets, places and build-
ings situated within its limit, entered into an agreement on August 14, 1949'
with the Appellant-Company Which was licensee under the Electricity Act, 1910.
The period during which the supply of electrical energy was to be made under
the said agreement was 20 years from the date on which it was executed. On •
May 10, 1960 the Company wrote a letter to the municipality that the said
agreement was to come to an end and on its expiry, the Company was not under
G any obligation to continue to supply energy to the Municipality as per the rates, •
termc; and conditions stated in the agreement. The company also informed that
if the municipality was not willing to purchase energy at the revised rates the
supply \vould be discontinued on the expiry of the period of the agreement. The
municipality thereafter wrote a letter on August 6, 1960 requesting the Company
to renew the agreement on the same terms and conditions. The Company by
its reply informed the municipality that it would not suoplv el.,.ctrical energy
H on the· same terms and conditions and insisted on payment being made at the
revised rates as stated in its letter dated May 10, 1960. The municipality there~
after filed a suit relying upon the provisions of sub-section (3) of section 22-A
NADIAD ELECTRIC CO. V. NADIAD' MUNICIPALITY 4 77
of the Act, for a declaration that it was entitled to the supply of electrical A
energy from the Company on the same· terms and conditions as \Vere specified
· in the agreernent, until the Company received a notice in writing from the
municipality requiring it to di.scontinue the supply. The company contested
the suit on the ground that the municipality was not entitled to the benefit of
sub-section (3) of section 22-A of the Act as it was not an establishment to
which the said provision \Va,'\ applicable, The Trial Court held that in the
absence of n notification as required by sub-section ( 1) of Section 22-A of B
the Act the n1unicipality was not entitled to claim the benefit of the provision
and therefore no relief could be granted in the suit and accordingly dismissed
the suit.
The municipality's appeal to the District Court was dismissed, but the second
appeal was partly allowed by a Single Judge of the High Court, and a decree
was passed granting relief in favour of the mqnicipality declaring that the com-
pany was bound under sub-section (3) of section 22-A of the Act to continue
to supply electrical energy to the municipality at the same rates and on the
same terms and conditions as were specified in the agreement, dated August 14,
1960. The Letters Patent Appeal filed by the company was dismissed by the
Division Bench of the High Court, which however certified the case as a fit one
for appeal under Article 133(1) (c) of the Constiiution.
In the appeal to this Court, 011 the question \.Vhether the municipality \\'as an D
establishment \Vhich can claim the benefit of sub-section (3) of section 22-A of
the Act.
• HELD·: 1. The High Court was in error in ignoring the requirements which
an establishment had to satisfy before claiming the benefit of sub-section (3)
' and in holding that if in the opinion of the Court, the establishment satisfied
that it was being used or intended to be used for maintaining supplies and E
services essential to the community, it could claim the benefit of sub-section (3)
even though no notification had been issued by the State Government under
5Ub-section (I) of Section 22-A of the Act. [489 H-490 BJ
2. If the agreement referred to in sub-section (3) of section 22-A of the
.Act is an agreement entered into by a licensee with an establishment which is.
at the time ,of the agreement, an establishment referred to in sub-section ( 1) of •
dection 22-A of the Act, then the provision in sub-section (3) making it appli-
cable to agreements made before the commencement of the Electricity (Amend·
ment) Act, 1959 by which section 22-A was introduced becomes meaningless
because the formation of the two opinions of the State Government that an
,establishment is being used or intended to be used for maintaining supplies and
services essential to the community and that it is necessary to issue a direction
' in respect of it under sub-section (1) can only be done after section 22-A of G:
the Act was introduced in the Act and there would be no establishment satisfy-
ing the requirements of section 22-A(I) before section 22-A(l) was introduced.
[486 G-487 Al
3. Sub-section ( 1) of section 22-A of tho Act was enactod by the Parliament
for the purpose of enab1ing the State Government to issue a direction and sub-
section (3) was enacted for the purpose of providing for tho continuance of an
I
agreement enterl':d into by a licensee with an establishment referred to in sub ... H
section (1) of section .22-A. \Vhat, is however, common to the hvo sub-sections
is that the establishment referred to in sub-section (1) and an establishment
478 SUPREME COURT REPORTS [1980] 2 S.C.R.
' A referred to in sub-section (3) of section 22-A should be of the same kind that
is it should be an establishment which IB in the opinion of the Stare Govern-
ment used or intended to be used for maintaining supplies and services essential
to the community and the fact of formation of such opinion is notified in the
Official Gazette. It should satisfy the test laid down in sub-section 22-A(l)
of the Act. [487 C-E]
B 4. There is no impediment for the State Government issuing a notification
under sub-section ( 1) of section 22-A in order that an establishrnent notified
therein gets the benefit of sub-section (3) of section 22-A of the Act. [487 H-
48E AJ
5. The words 'referred to in sub-section (I)' appearing in sub-section (I)
of section 22-A of the Act are descriptive of and define the establishment to
which sub-section (3) of section 22-A applies and in order to identify such
c establishment, recourse should be had to tbe latter part of sub-section (I) which
lays down the criteria which such ..tablIBhrnent should satisfy. [488 BJ
6. A statutory definition or abbrevation should be read subject to all the
qualifications expressed in the Statute and unless the context in which the word
defined appears otherwise requires, it should be given the same meaning given
by the words defining it. [488 C]
D
7. The power to issue a notification under section 22-A ( 1) of the Act
involves an element of selection and the said process of selection cannot be
construed as an empty formality which can be dispensed with. Nor can that
power of selection which is entrusted to the State Government by the Parlia-
ment be claimed by the Courts. It is for tbe State Government to notify the
establishment which should be the beneficiary of a direction to be issued under
E section 22-A(l) or which is entitled under section 22-A(3) of the Act to the
supply of electrical energy on the same terms and conditions as are specified in
the agreement entered into by it with the licensee even after the expiry of the
agreement until such establishment serves a notice in writing on the licensee
asking the licensee to discontinue the supply. [488 H-489 BJ
8. Section 22-A of the Act, suggest,, that the intention of Parliament appears
F to be that the State Government can ~ue a direction only in the case of an
establishment which in its opinion gatis:fies the qualifications mentioned therein
nnd that sub-section (3) should be applicable only to an establishment which
in the opinion of the State Government satisfies the said qualifications. [488 E-1'
9. Sub-section (3) of section 22-A of the Act makes a serious inroad into
the rights of the licensee flowing from a contract stipulating a specific period
G during which it should subsist and compels the licensee to supply energy to the
establishment even after the expiry of the agreement until a notice is issued in
writing by the establishment requirin,e: the, licensee to discontinue the supply.
[489 DJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 358 of 1970.
From the Judgment and Order dated 14-10-1969 of the Gujarat
H
High Court in L.P. Appeal No. 11/63.
R. P. Bhatt, K. J. ~ohn and D. N. Misra for the Appellant.
NADIAD ELECTRIC CO. V. NADIAD MUNICIPALITY 479
(Venkataramiah, /.)
Y. S. Ch/tale, V. B. Joshi, P. C. Kapoor, Mrs. V. D. Khanna and A
Miss Geeta Sharma for Respondent No. 1.
I. N. Shroff for Respondent No. 2.
The Judgment of the Court was delivered by
VENKATAitAMIAH, J.-The question which arises for considera-
B
tion in this appeal by certificate is whether the plaintiff in the suit
out oi which this appeal arises i.e. Nadiad Borough Municipality
Nadiad is an establishment which can claim the benefit of su~ection
(3) of section 22-A of the Indian Electricity Act, 1910 (Act No. 9
of 1910) (hereinafter referred to as 'the Act'). The plaintiff insti-
tuted the said suit on August 12, 1960 against the defendant, Nadiad c
Electric Supply Co. Ltd., Nadiad on the file of the Civil Judge (Senior
Division), Nadiad for a declaration that it was entitled to the mpply
of electrical energy from the defendant on the same terms and condi-
tions as were specified in the agreement dated August 14, 1940
entered into between it and the defendant until the defendant received
a notice in writing from the plaintiff requiring it to discontinue the D
supply and for an injunction restraining the defendant from discon-
tim.iing: the supply till •uch notice was served on the defendant. The
facts set out in the plaint were briefly these : The plaintiff was a
Municipality which was under an obligation to make reasonable and
' adequate provision for lighting of public streets, places and buildings
situated within its limits and for that purpose, the plaintiff had entered E
into an agreement on August 14, 1940 with the defendant which was
a licensee under the Act. The period during which the supply of
electrical energy was to be made under the agreement was 20 years
from the date on which the agreement was executed. On May 10,
l 960, the defendant wrote a letter to the plaintiff that the suit agree-
ment was to come to an end on the expiry of August 13, 1960 lnd F
the defendant was not nuder any obligation to continue to supply
• energy to the plaintiff as per rates, terms and conditions stated in
the agreement after its expiry and that it was willing to supply energy
• thereafter provided the plaintiff was willing to pay the charges for
the supply at the new rates demanded by it. The defendant also G
informed the plaintiff that if the plaintiff was not willing to purchase
energy at the revised rates, it would discontinue the supply on the
expiry of the period of the agreement. The plaintiff thereafter wrote
a letter on August 6, 1960 requesting the defendant to renew the
agreement on the same terms and conditions as were mentioned in
the agreement dated August 14, 1940. By its reply dated August B
9, 1960, the defendant informed the plaintiff that it was not willing
to supply electrical energy on the same terms and conditions men-
480 SUPREME COURT REPORTS [198(.)J 2 S.C.R.
A tioned in the agreement after its expiry and insisted npon payment
,, • '
being made at the revised rates as stated in its Jetter dated May 10,
1960. The plaintiff thereafter filed the above suit on August 12, 1960
for the reliefs referred to above principally relying upon the provisions
of sub-section ( 3) of section 22-A of the Act. The defendant, in the
course of its written statement, inter alia contended that the plaintiff
B was not entitled to the benefit of sub-section (3) of section 22-A of
the Act as it was not an establishment ta which the said provision was
applicable. In the course of the trial, it was not disputed that the
State GoveJnmenl had not issued any notification stating that in its
opinion the plaintiff was an establishment used or intended to be used
for maintaining supplies and services essential to the community as
c required by sub-section ( 1) of section 22-A o~ the Act. The trial
court held that in ihc absence of such a notification. the plaintiff was
not entitled to claim the benefit of sub-section (3) of section 22-A
of the Act and, therefore, no relief could be granted in the suit. The
suit was accordingly dismissed.
D Aggrieved by the decree of the trial cqurt, the plaintiff filed an
appeal before the District Judge of Kaira at Naidad. The said appeal
was transferred to the file of the 2nd Extra Assistant Judge at •
Ahmedabad. After hearing the parties, the 2nd Extra Assistant Judge ..
dismissed the appeal. Against the decree of the first appellate court,
the plaintitl filed a second appeal before the High Court of Gujarat. •
E The second appeal was allowed in part by a single Judge of the High
Court of Gujarat and a decree was passed granting a declaration in
favour of the plaintiff declaring that the defendant was bound under
sub-section (3) of section 22-A of the Act to continue to supply
electrical energy to the plaintiff at the same rates and on the same
terms and conditions as were specified in the agreement dated Au~st
F
14, 1940 so long as the plaintiff continued to be an establishment u1td
or intended to be used for maintaining supplies and services essential
to the community and mtil the defendant received a notice in wrif"mg
from the plaintiff requiring the defendant to discontinue the supply,
.
such obligation, however, being subjec! to the other provisions of the
Act and the provisions of the Electricity (Supply) Act, 1948, including •
G
sections 57 and 57A and the Sixth and Seventh Schedules to that Act.
The relief of permanent injunction prayed for in the suit was, however,
refused on the ground that the defendant had never refused to supply
electrical energy to the plaintiff at the same rates and on the same
terms and conditions as were specified in the agreement dated August
n 14, 1940 if it was held either that there was a covenant for renewal
contained in the agreement dated August 14, 1940 or that sub-section
(3) of sectio1' 22-A of the Act applied to the facts of the case.
NADIAD ELECTRIC CO. V. NADIAD MUNICIPALITY 481
(Venkataramiah, J.)
Against the decree passed in the second appeal, the defendant filed A
Letters Patent Appeal No. 11 of 1963 on the file of the High Court.
That appeal was dismissed by a Division Bench of the High Court.
Thereafter the Division Bench issued a certificate under Article 133 ( 1)
(c) of the Constitution certifying that the case was a fit one for appeal
to this Court. On the basis of the above certificate, the defendant has
filed this appeal before this Court. In the course of this appeal on an B
application made by the plaintiff, the Gujarat State Electricity Board
has al~o been impleaded as a respondent.
We shall now make a brief survey of the relevant provisions of the
Act. Sub-section (2) of section 21 of the Act provides that a licensee
who is authorised to supply energy under Part II thereof may, with the c
previous sanction of the State Government given after consulting the
local authority where the licensee is not the local authority, enter into
an agreement with a person who is or intends to become a consumer,
with conditions not incons,istent with the Act or with his licence or with
any rules :made under the Act and may, with the like sanction given
D
after like consultation, add to or alter or amend any such condition;
and that any conditions introduced in the agreement by the licensee
without such sanction shall be null and void. The State Government
may also under sub-section (3) of section 21 of the Act after like con-
sultation add any new condition or cancel or amend any condition or
• part of a condition previously sanctioned after giving to the licensee not E
less than one month's notice in writing of its intention so to do. Section
22 of the Act provides that where energy is supplied by a licensee,
every person within the area of supply shall, except in so far as is other-
wise provided by the terms and conditions of the licence, be entitled,
on application, to a supply on the same terms as those on which any
other person in the same area is entitled in similar circumstances to a F
corresponding supply.
Section 23 ( 1) of the Act prohibits a licensee from making any
agreemoot for the supply of energy showing undue preference to any
person. Sub-section (3) of section 23 of the Act provides that in the
ab~en1:0 of an agreement to the contrary, a licensee may charge for G
energy supplied by him to any consumer by the actual amount of energy
so supplied, or by the electrical quantity contained in the supply, or by
such other methods as may be approved by the State Government, Sec-
tion 24 cl' the Act authorises the licensee to discontinue the supply of
energy to any consumer neglecting to pay the charges payable by him.
H
A combined reading of these provisions shows that it is open to a
licensee to enter into an agreement with the previous sanction of the
'
...
. •
482 SUPREME COURT REPORTS [1980] 2 S.C.R.
,, ~
•
A State Government with any consumer to supply electrical energy at
the agreed rate subject to the other provisions of the Act and that be
cannot show undue preference to any person in the matter of supply
of electrical energy. The above provisions like the other provisions of
the Act are subject to section 70 of the Electricity (Supply) Act, 1948
(Act No. 54 of 1948) which provides that no provision of the Act or
B of any rules made thereunder or of any instrument having effect by
virtue of such law or rule shall, so far as it is inconsistent with any of
the provisions of the B!ectricity (Sepply) Act, 1948, have any effect
~
and that save as otherwise provided in that Act, the provisions of that
Ac: ~hall be in addition to, and. not in derogation of the Act. Section
22-A of the Act which arises for consideration in this case was inserted
in the Act by the Electricity (Amendment) Act, 1959 (Act No. 32
oi 1959). It reads thus :
"22-A. (1) The State Government may, if in its opinion
it is necessary in the public interest so to do, direct any licen-
see to supply, in preference to any other consumer, energy re-
D quired by any establishment which being in the opinion of the
State Government an establishment used or intended to be
used for maintaining supplies and services essential to the
community, is notified by that Government in the Official
Gazette in this behalf. •
E (2) Where any direction is issued under sub-section (1)
m:iuiring a licensee to supply energy to any establishment and
any difference or dispute arises as to the price or other terms
and conditions relating to the supply of energy, the licensee
shall not by reason only of such difference or dispute be en-
titled to refuse to supply energy but such difference or dispute
F shall be determined by arbitration.
(3) Where any agreement by a licensee, whether made '
before or after the commencement of the Indian Electricity
(Amendment) Act, 1959, for the supply of energy with any
establishment referred to in sub-section (1) expires, the licen-
see shall continue to supply energy to such establishment on
G the same terms and conditions as are specified in the agree-
ment until he receives a notice in writing from the establish- •
ment requiring him to discontinue the supply.
( 4) Notwithstanding anything contained in this Act, or
in the Electricity (Supply) Act, 1948, or in his licence or iu
II any agreement entered into by him for the supply of energy,
a licensee shall be bound to comply with any direction given
to him under sub-section ( 1) and any action taken by him in
NADIAD ELECTRIC CO. V. NADIAD MUNICIPALITY 483
(Venkataramiah, J.)
pursuance of any such direction shall not be deemed to be a
contravention of section 23."
Even though the licensee has no right to show undue preference to
any person in the matter of supply of electrical energy and it is
open to the licensee with the previous sanction of the Govermnent to
enter into an agreement with a consumer containing conditions includ-
ing the stipulation regarding the charges payable by the consumer for
a specified period subject to the other provision of the Act, section
22-A of the Act authorises the State Government to give directions to a
licensee in regard to the supply of energy to an establishment referred
to in sub-section (1) in preference to auy other cousumer and it also
provides that in the case of any establishment referred to in sub-section
(1) if an agreement has been entered into by a licensee whether made
before or after the commencement of the Electricity (Amendment) Act,
1959 ior the supply of energy, the licensee shall continue to supply
energy to such establishment on the same terms and conditions as are
specified in the agreement even after the expiry of the agreement until
, he receives a notice in writing from the establishment requiring him to
.. d;sconlinue the supply. In order to understand the contentions urged
by the parties, it is necessary to deal with the provisions of section 22-A
oE the Act in some detail. Sub-section (1) of section 22-A of the Act
authorises the State Government to issue direction to a licensee to
supply energy to an establishment in preference to any other consumer E
(i) If in its opinion it is necessary in the public interest to give such
direction and (ii) if the establishment in question is in the opinion of
tlie State Government an establishment used or intended to be used for
maintaining supplies and services essential to the community and the
decision of. the State Government that in. its opinion the establishment
is used or intended to be used for maintaining supplies and services
• essential to the community is qotified by that Government in the Official
Gazette. Sub-section ( 1) of section 22-A of the Act speaks of the
State Government forming two opinions--one regarding the question
whether it is necessary in the public interest to issue a direction to sup-
ply energy to an esfablishment in preference to any other consumer and
the oilier regarding the character of the establishment i.e. regarding the
question whether the establishment is one used or intended to be used
for maintaining supplies and services essential to the community. In
other words, the decision on the question whether an establishment i3
used or intended to be used for maintaining supplies and services essen-
tial to the community has to be taken by the State Government either B
before or at the time of issuing a direction under section 22-A ( 1) . Sub-
~ections (2) and ( 4) of section 22-A of the Act are ancillary to the
484 SUPREME COURT REPORTS [1980] 2 S.C.R.
, ~
.A power of the State Government to issue a direction under sub-section •
( 1) thereof.
The material provision with which we are concerned in this appeal
is sub-section (3) of section 22-A of the Act which provides that where
any agreement by a licensee, whether made before or after the com-
•B mencement of the Electricity (Amendment) Act, 1959, for the supply
of energy with any establishment referred to in sub-section ( 1) expires,
the licensee shall continue to supply energy to such establishment on the ~
same terms and conditions as are specified in the agreement until he . ~
receives a notice in writing from the establishment requiring him to dis- ~ ·
continue the supply. The argument urged on behalf of the plaintiff
•C which was rejected by the trial court and the first appellate court but
was accepted by the learned Single Judge of the High Court in second
appeal and by the Division Bench of the High Court in the Letters
Patent Appeal was that the agreement entered into by it with the defen-
dant on August 14, 1940 would continue to remain in operation by
virtue of sub-section (3) of section 22-A of the Act even after its
•D expiry because the plaintiff was an establishment which was 'used or
intend~d to be used for maintaining supplies and services essential to
the community' and that there was no l1ecessity of the publication of '
a notification in the Official Gazette stating that the State Government
~~ was of the opinion that it was an establishment used or intended to be
)'~ u~r maintaining supplies and services essential to the community.
~e contention urged on behalf of the plaintiff in regard to the above
proposition was that the words "any establishment referred to in sub-
section (l)" in sub-section (3) of section 22-A of the Act meant 'an
establishment used or intended to be used for maintaining supplies and
services essential to the community' and not any establishment which
•F was notified by the State Government in the Official Gazette as an esta-
.blishment which in the opinion of the State Government was being used
or intended to be used for maintaining supplies and services essential to
the community. The very same contention is urged before us in th.is
appeal on behalf of the plaintiff. It is argued on behalf of the defen-
dant that sub-section ( 3) of section 22-A of the Act is applicable only •
·G in the case of an establishment which in the opinion of the State
Government is an establishment used or intended to be used for main-
taining supplies and services essntial to the community in respect of
which a d'rection is issued to the licensee under sub-section (1) and a
notification is issued by that Government in the Official Gazette in that
behalf. The judgment delivered in the Letters Patent Appeal, which is
H an affirming one, appears to be a summary of the judgment of the learn-
ed Single Judge of the Higl1 Court. The learned Single Judge in his
judgment to which our attention was drawn by the learned counsel for
NADIAD ELECTRIC CO. V. NADIAD MUNICIPALITY 485
(Venkataramiah, J.)
- •.... the parties while dealing with sub-section ( 1) of section 22-A of the
Act observed :
A
" 'Which is the establishment referred to in sub-section
( 1) of section 22-A ?' and if that question is asked, it is
obvious that the establishment referred to in sub-section (1)
of section 22-A is an establishment used or intended to be B.
used for maintaining supplies and services essential to the
community. Of course, the determination of the question
whether a particular establishment is an establishment used
or intended to be used for maintaining supplies and services
essential to the community, is as I have pointed out above left
to the subjective satisfaction of the State Government; but the c
establishment referred to in sub-section (1) of section 22-A
is indubitably an establishment used or intended to be used for
maintaining supplies and services essential to the community
and it is only when a particular establishment is, in the
opinion of the State Government, such an establishment that
I>
it can be notified by the State Government under sub-section
( 1) of section 22-A. The establishment in favour of which a
direction can b0 given under sub-section (1) of section 22-A
must be an establishment used or intended to be used for
maintaining supplies and services essential to the community
but someone Iimst have the power to determine whether a
particular establishment is such an establishment. That
power is entrusted by t])e legislature to the State Government
and the determination of the State Government in its subjec-
tive satisfaction is made final and conclusive; but it is clear
that what the State Government has to find in its subjective
satisfaction is the fact as to the establishment being used or F
intended to be used for maintaining supplies and services
essential to the community and it is because a particular esta-
blishment is such an establishment as determined by the State
Government, that the State Government can notify it for the
purpose of giving it preferential treatment in· the matter of
supply of electrical energy. It is, therefore, obvious that the G
establishment referred to in sub-section ( 1) of section 22-A
is an establishment used or intended to be used for maintain-
ing supplies and services essential to the conununity and it is
not the same thing as an establishment notified under sub-
section (1) of section 22-A."
H
\ Having stated so, the learned Judge proceeded to observe that the
, words 'any establishment referred to in sub-section ( 1)' in sub-section
486 SUPREME COURT REPORTS [1980] 2 S.C.R.
A (3) of section 22-A of the Act referred to any establishment used or
intended to be used for maintaining supplies and services essential to
the community and were not limited to an establishment which being in
,• -
the opinion of the State Government an establishment used or intended
to be used for maintaining supplies and services essential to the com-
munity was notified by the State Government in the Official Gazette, as
required by sub-section ( 1) of section 22-A of the Act. One of the
reasons given by the learned Judge in support of the above conclusion
was as follows : -
"The provisions of sub-section (3) of section 22-A be-
come applicable only an agreement by a licensee, whether
made before or after the commencement of the Indian Elec-
tricity (Amendment) Act, 1959, for the supply of electrical
energy with any establishment referred to in sub-section (1)
of section 22-A expires after the coming into force of the
Indian Electricity (Amendment) Act, 1959. The agreement
on the expiration of which the provisions of sub-section ( 3)
D of section 22-A are attracted must therefore be an agreement
made by a licensee with an establishment referred to in sub-
section ( 1) of section 22-A for the supply of electrical energy,
whether before or after the commencement of the Indian
Electricity (Amendment) Act, 1959. The establishment with
E whom the agreement has been made by the licensee must,
therefore, evidently be an establishment referred to in sub-
section (1) of section 22-A at the date when the agreement
was made between the parties. It is at the date of the agree-
ment that the establishment must satisfy the description given
in the words "any establishment referred to in sub-section
F ( 1)" for it is only then that it can be said that the agreement
was made by the licensee with an establishment referred to in
sub-section (1) of section 2;?-A."
It is difficult to agree with the proposition set forth in the above "
extract of the judgment of the learned Single Judge because if the agree-
G ment referred to in sub-section (3) of section 22-A of the Act is an
agreement entered into by a licensee with an establishment which is, at
the time of the agreement, an establishment referred to in sub-section
(1) of section 22-A of the Act, then the provision in sub-section (3)
making it applicable to agreements made before the commencement of •
the Electricity (Amendment) Act, 1959 by which section 22-A was
H introduced becomes meaningless because the formation of the two
opinions of the State Government that an establishment is being used
or intended to be used for maintaining supplies and services essential
NADIAD ELECTRIC CO. v. NADIAD MUNICIPALITY 487
(Venkataramiah, J.)
to the community and that it is necessary to issne of direction in respect A
of it under snb-section ( 1), can only be done after section 22-A of the
Act was introdnced in the Act and there would be no establishment
satisfying the requirements of section 22-A(l) before section 22-A
was introduced.
The next ground relied on by the learned Single Judge to hold that B
the establishment referred to in sub-section (3) of section 22-A of the
Act need not satisfy all the requirements of an establishment referred
to in sub-section (1) of section 22-A whlch again is untenable was that
the object of enacting sub-section ( 1) was different from the object of
enacting sub-section ( 3) and therefore, there was no need to treat an c
establishment referred to in sub-section ( 1) on par with an establish-
ment in sub-section (3). It may be that sub-section (1) of section
22-A of the Act was enacted by the Parliament for the purpose of
enabling the State GO'Vemment to issue a direction and sub-section (3)
was enacted for the purpose of providing for the continuance of an
agreement entered into by a licensee with an establishment referred to D
in sub-section (1) of section 22-A, but what is, however, co=on to the
two sub-sections is that the establishment referred to in sub-section ( 1)
and an establishment referred to in sub-section (3) of section 22-A
should be of the same kind i.e. it should be an establishment which is in
the opinion of the State Government used or intended to be used for
maintaining supplies and services essential to the community and the E
fact of formation of such opinion is notified in the Official Gazette. It
should satisfy the tests laid down in section 22-A(l) of the Act.
The third reason given by the learned Single Judge for holding that
the establishment referred to in sub-section (3) of section 22-A of the
Act could not be an establishment notified by the State Government as F
one which in its opinion was being used or intended to he used for
maintaining supplies and services esBential to the community was that
the issue of a notification by the State Government under sub-section
( 1) of section 22-A would be unjustified except when the Government
was of opinion that a direction should be issued. In other words, the G
, learned Single Judge was of the view that when the State Government
felt that there was no necessity to issue any direction, it could not issue
any notification under that provision stating that an establishment was
in its opinion an establishment which was being used or intended to
be used for maintaining supplies and services essential to the commu-
nity. We do not think that the above observation of the learned Single H
Judge is correct since there is no impediment for the State Government
\
, issuing a notification under sub-section (1) of section 22-A in order
488 SUPREME COURT REPORTS [1980] 2 s.c.R.
A that an establishment notified therein gets the benefit of sub-section (3)
of section 22-A of the Act.
The Division Bench in its judgment in the Letters Patent Appeal
has adopted more or less the same reasoning adopted by the learned
Single Judge in upholding the contention of the plaintiff.
B The words 'referred to in sub-section (1)' appearing in rub,section
(3) of section 22-A of the Act are descriptive of and define the esta-
blishment to which sub-section (3) of section 22-A applies and in order
to identify such establishment we must have recourse to the latter part
of sub-section ( 1) which lays down the criteria which such establish-
ment should satisfy.' A statutory definition or abbreviation should be
C read subject to all the qualifications expressed in the statute and unless
the context in which the word defined appears otherwise requires, it
should be given the same meaning given by the words defining it.'
A fair reading of section 22-A of the Act suggests that the Parlia-
ment did not intend to empower the State Government to issue a direc-
D tion under sub-section (1) of section 22-A or to provide for the conti-
nuance of the agreement entered into by a licensee with an establish-
ment in every case where the establishment was one which was being
used or intended to be used for maintaining supplies and services essen-
tial to the community. The intention of the Parliament appears to be
that the State Government can issue a direction only in the case of an
E establishment which in its opinion satisfies the qualifications mentioned
therein and that sub-section (3) should be applicable ouly to an estab-
lishment which in the opinion of the State Government satisfies the said
qualifications. The determination of the question whether an establish- .
ment satisfies the objective test mentioned in section 22-A(l) of the
Act is left to the State Government. The law also prescribes that such
F determination should be made known to all concerned by a formal
publication in the official Gazette. Instead of providing separately in
section 22-A of the Act that an establishment referred to in any of the
sub-sections of that section was an establishment which in the opinion ,.
..
of the State Government was one used or intended to be used for main-
taining supplies and services essential to the community, the Parliament
G defined the establishment to which section 22-A was applicable in sub-
section (1) and instead of repeating the same definition in sub-section
(3) provided that an establishment to which sub-section (3) thereof
was applicable was an establishment referred to in sub-section (1) . •
We are of the view that the power to issue a notification under sec-
H tion 22-A (1) of the Act involves an element of selection and that the
said process of selection cannot be considered as an empty formality
which can be dispensed with. Nor can that power of selection which is
NADWI UICTJJc CO. V. NAI>IAD MUNICIPALITY 489
(V~nkataramiah, /.)
entrusted to tho State Government by the Parliament be claimed by the A
-1
' courts. It is for the State Gove=ent to notify the establishment whicll
ehoold be the beneficiary of a direction to be issued under sectioa
Z2-A(l) or which is entitled under section 22-A(3) of the Act to th•
supply of electrical energy on the same terms and conditions as are
specified in the agreement entered into by it with the licensee even after
tbe expiry of the agreement until such establishment serves a notice ia ll
writing on the licensee asking the licensee to discontinue the supply.
Having regard to the context in which section 22-A of the Acl
appears and '.n particular to the language used in sub-sections (1) and
(3) of section 22-A, we are of the view that it is not possible to hold
that section 22-A(3) is applicable to every establishment used or in- c
lended to be used for maintaining supplies and services essential to the
community even though the State Government has not declared in a
notification published in the Official Gazette that it is of the opinioa
tbat the establishment satisfied the qualification referred to in sub-
section (1). We have to bear in mind that sul>-section (3) of sectio11
22-A of the Act makes a serious inroad into the rights of the licensee D
flowing from a contract stipulating a specific period during which ii
should subsist and compels the licensee to supply energy to an esta-
blishment referred to therein on the same terms and conditions as are
.. • specified in the agreement already entered into even beyond the period
of its expiry until a notice is issued in writing by the establishment , ..
.. quiring the licensee to discontinue the supply. If a liberal construction
is placed on the words "any establishment referred to in sul>-section
(!)"appearing in sulHection (3) of section 22-A as referring to every
establishment which is being used or intended to be used for maintain-
ing supplies and services essentia:l to the community irrespective of the
issue of a notification by the State Government that it is in its opinion
such an establishment, it is bound to impose a greater restraint on the
ri.ghts of the licensee than the restraint that will be imposed on it if ii
is held that the establishment referred to in sul>-section ( 3) of sectioa
22-A is one notified by the State Government as required by sul>-sectioa
(I) of section 22-A. If the State Government does not issue such a
notification in the case of an establishment then such establishmenl
G
would not be eligible to claim the benefit of section 22-A(3). We may
also observe here that any establishment whose interests are required
to be protected by the extension of the benefit of section 22-A(3), the
State Government can always issue a notification under sub-section (I)
stating that in its opinion the said ~stabllshment satisfies the qualificatioa
•e:ationed therein. Iii(
In the circumst~, we are constnined to eay that the High Court
was in error in ignorinl!I the requirements which an establishment had
19--21 SCJ/80
00 SUPREMI! COl:l\T. JlBPORTS (1980] 2 ~.C.R.
A to liatisfy before claiming; the benefit of sub-section (3) and in holding
tliat if in the opinion of the Court, the establishment satisfied that it
,.
wu being; us.ed 'or intended to be used for maintaining suppliea arul
sel"Vices essential to the community, it could claim tho benefit of. sub-
section (3) even giough no notification had been issued by the State
Government under sub-section ( 1) of section 22-A of the Act
B
In the reisult, we allow tho appeal, set aside the judgmenfi and
<ioccees passed by tho High Court in the serond appeal and in the
Letters Patent Appeal and restore the decree of tlw trial court ali amtm-
ed by tho firi;t 11.pp...-llato court dismissing the liuit. Having regard to lhe
circumstwceii of the case, ~WO direct the partiei; to bear their own costs
0 throughout.
N.V.K. Appeal 111/owed.
•
•
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